Analytics

Last week saw a series of bad news from Europe and the USA that prompted a drop of indices. President of the European Central Bank Jean-Claude Trichet said that the regulator concentrated on curbing inflation, against the slowdown of economic growth in the Eurozone, causing a tide of sales on European markets. On Thursday, American markets closed with a 3% decline due to unfavorable unemployment figures in the USA. On Friday, it was reported that industrial production in Germany declined by 1.8%, instead of the forecasted 0.5%. Exactly this news prompted a new wave of capital drain from stock markets all over the world.

Most of the world leading stock indices closed with a rise. Markets were mainly boosted by encouraging reports of economic growth in the USA. The estimate of the GDP growth rate in the second quarter was raised from 1.9% to 3.3% per annum, above both the forecast and the average growth rate for several years. Good reports prompted some recovery on stock markets but so far failed to cause steady growth – investors seem to expect that problems in the housing sector and the labor market may bring another tide of crisis.

Last week was unlucky for most of the world’s markets. US markets continued their decline under the pressure of statistic reports of bad performance in the financial and mortgage segments, and rising oil prices. Fears of investors were stirred up mainly by the situation with Fannie Mae and Freddie Mac mortgage agencies. Most experts agree that the companies facing the threat of bankruptcy will not manage to avoid nationalization. European markets also continued their slide. Asian markets were declining, too, along with most of the world indices. The Russian stock index, RTS, in course of the week fell by 7.7%, mainly due to another aggravation of relations with the West.

Outside reports over the week were largely discouraging. The largest EU economies – Germany, France and Italy – demonstrated GDP decline in the 2nd quarter by 0.5%, 0.3% and 0.3%, respectively. As a result, the European currency exchange rate fell record-low for seven months: EUR1=USD1.46. Fears of a slowdown of the European economy growth brought about some drain of speculative capital from raw material markets, which lowered quotations of most raw materials.

Last week, the key indices of European stock markets showed varied dynamics. The anti-crisis program for Freddie Mac and Fannie Mae mortgage agencies announced by the US authorities had a good effect on US stock indices that closed the week with a gain. However, according to FRS Head Ben Bernanke, financial markets continue to experience strong pressure caused by uncertain prospects of the US economy. Foreign stock markets were also boosted by the substantial reduction of supply for oil that fell by some 10% within a week.

The world stock markets last week were swept over by “bear” spirits. As a result, most of the world indices showed negative results: US Dow Jones IA — minus 1.67%, Japan’s NIKKEI 225 — minus 1.31%, British FTSE 100 — minus 2.79%. The drop was prompted by rumors of possible liquidity problems of the US mortgage market giants Fannie Mae and Freddie Mac, and a bankruptcy of the seventh largest mortgage bank of the USA - IndyMac Bank.

Last week again brought negative reports from all stock markets. The RTS index, previously performing rather well, was hurt the most.

Despite expectations of many analysts who predicted reversal of the stock market trends with the beginning of spring, the past quarter failed to meet investor hopes. In course of the quarter, PFTS index fell by 22%, while Dow Jones declined by only 7.7% (the highest quarterly decline recorded outside the country), and the Russian RTS index gained 13.5% (the highest quarterly increase).